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Nelson Company manufactures product Z97, which incurs costs of $175 for direct materials and $140 for direct labour per unit. The company estimated its production
- Nelson Company manufactures product Z97, which incurs costs of $175 for direct materials and $140 for direct labour per unit. The company estimated its production overhead and direct labour hours for the month as follows:
| Department A | Department B | Department C |
Overhead costs | $95,000 | $127,000 | $83,000 |
Direct labour hours | 4,500 | 12,000 | 5,500 |
Each unit of product Z97 is produced using:
- 15 labour hours in department A
- 10 labour hours in department B, and
- 9 labour hours in department C
Calculate the cost of one unit of product Z97 using a company-wide overhead rate assuming the allocation base is direct labour hours. SHOW YOUR WORK & CALCULATION
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